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Are Furloughs an Option?

Times remain tough. And most employers would prefer not to fire people, if they can avoid it. One possible way to avoid layoffs is through furloughs — making workers take an unpaid leave of absence for a set period of time.

Every day, it seems, another company, nonprofit group, governmental agency or university announces some sort of furlough program to cut costs.

The following items can help you decide if furloughs are an option for your firm.

FURLOUGHS 101 If you need to explain to employees what a furlough is, or could use a brief primer yourself, About.com offers a quick summary.

It is written for those in their 20s who have never been employed during a recession.

A FURLOUGH BANK Unpaid time off can be a severe hardship for some employees. To lessen the burden, some companies have taken to creating what is, in essence, a “furlough bank,” which allows employees to stay fully employed if they can find someone else on staff to take their unpaid leave.

If, for example, everyone is required to take a week off, Employee A can continue to work with pay if she gets employee B to take both his week and Employee A’s week off without pay.

NOT SO FAST John Sullivan, a professor of management at San Francisco State University, says furloughs may seem to be a good idea “but they might end up not saving money at all and could cause more turmoil than they are worth.”

Mr. Sullivan argues that “firms use furloughs instead of layoffs because they lack the courage to look individual employees in the eye and terminate them.”

“The key to any effective salary-savings program is to target the individuals who add little value compared to their salary. The process of selecting low performers can cause turmoil among employees,” he says, “so managers take the easy way out by cutting a portion of the salary of every employee. In my view, managers get paid to make tough decisions, not to avoid them.”

These are among the other problems he has with furloughs:

1. They aren’t cost-effective. “Although they are designed to save money, most furloughs save a lot less money than actual layoffs would. During furloughs, employees receive either a reduced wage or no wage, but their employee benefits (up to 40 percent of salary), equipment costs, office costs, etc., continue.”

2. They are not fair to your best employees. “They have done an excellent job, delivered tremendous value for the organization, yet are punished the same as poor performers. In other words, if you had a choice between furloughing Tiger Woods and Homer Simpson, would you actually furlough them both?”

3. It can alienate your customers. “Reduced staffing levels anger customers. You have reduced their service but not the fee that they pay,” he says. “In a competitive marketplace, some customers either can’t or won’t wait, so you’ll lose them to someone else that is fully staffed.”

4. Job hunting. This short-term solution “is likely to cause most of your employees to go into ‘job search mode.’” Some of this is likely to be on company time, further decreasing productivity.

MORE PRODUCTIVITY? Some experts expect furloughs to become a permanent part of the landscape, as one means to keep company costs down over the long term.

That actually could be a good thing for both the organizations and the people that employ them, argues Lori Long, who, in the blog by the workplace expert Anita Bruzzese, is described as an expert in work-life balance.

“Workers may become more efficient because they know they have to get work done in less time. And because these workers are going to be less stressed when they’ve had some time off, I think they’re going to be happier and more productive and creative,” Ms. Long says. “We may find that a temporary solution becomes a permanent solution.”

LAST CALL The recent spate of unpaid leaves has prompted a new workplace syndrome: “furlough envy.”

It seems the idea of being forced to take some time off — even knowing they will not be paid — is extremely appealing to some workers.

“I’d do that in a heartbeat,” one New York publishing executive told the writers. “I never get to take all the vacation that I’m allowed, so if somebody told me that I had to take vacation, I would love it.”